Men's Wearhouse Counters With Bid To Buy Jos. A. Bank For $1.2 Bln

(RTTNews) - Men's Wearhouse, Inc. (MW) on Tuesday floated an offer to acquire smaller peer Jos. A. Bank Clothiers, Inc. (JOSB) for $55.00 per share in an all-cash deal valued at about $1.2 billion, just ten days after Jos. A. Bank withdrew its offer for Men's Wearhouse.

The offer was revealed in a letter from Men's Wearhouse President and CEO Douglas Ewert to Jos. A. Bank's Board of Directors.

Jos. A. Bank had withdrawn its $2.3 billion all-cash offer for Men's Wearhouse in mid-November, saying the Men's Wearhouse board failed to engage in good faith negotiations by a November 14 deadline.

Hampstead, Maryland-based JoS. A. Bank had on October 9 made a non-binding proposal to acquire all outstanding shares of Men's Wearhouse for $48 per share in cash. Men's Wearhouse rejected the offer, stating it significantly undervalues the company and its strong prospects for continued growth and value creation.

Further, the retailer's board of directors also adopted a "poison pill" in the form of a limited duration shareholder rights plan, declaring a dividend of one right on each share of the company's common stock outstanding on October 21.

"Following Jos. A. Bank's unsolicited public proposal to acquire Men's Wearhouse, our Board of Directors evaluated a number of alternatives to deliver value to our shareholders. After a thorough review, our Board concluded that an acquisition of Jos. A. Bank by Men's Wearhouse has strategic logic and the potential to deliver substantial benefits to our respective shareholders, employees and customers," Men's Wearhouse Lead Director Bill Sechrest said in a statement.

The offer represents only an 8.7 percent to Jos. A. Bank's closing share price of $50.60 on Monday, and a 32 percent premium over its closing share price of $41.66 on October 8, the day prior to Jos. A. Bank's proposal to acquire Men's Wearhouse.

Houston, Texas-based Men's Wearhouse said it intends to fund the deal by a combination of cash on our balance sheet and debt financing. It added that the offer does not require any costly third-party equity investment and is not conditioned on financing.

Men's Wearhouse noted in the letter that the offer provides Jos. A. Bank shareholders with substantial premium and immediate liquidity for their investment.

The proposed deal will create a combined company that will become the fourth largest U.S. men's apparel retailer, with more than 1,700 total stores and pro forma sales of more than $3.5 billion. It will also become a premier men's apparel retailer with enhanced scale and a broadened customer reach, which is expected to drive significant shareholder value.

The deal is expected to be substantially accretive to Men's Wearhouse's earnings in year one of closing. Men's Wearhouse shareholders would benefit from run-rate annual synergies of about $100 to $150 million realized over three years through improving purchasing efficiencies, optimizing customer service and marketing practices, and streamlining corporate functions.

Men's Wearhouse noted that it will maintain the Jos. A. Bank's store banner, and the management of the combined company would consist of the most qualified individuals from both companies.

Men's Wearhouse also added that the deal would enable it to maintain its quarterly dividend of $0.18 per share.

Additionally, Men's Wearhouse said its largest shareholder, Eminence Capital, also one of Jos. A. Bank's large shareholders, has publicly articulated their strong desire to see this combination effected.

"We believe we are the right acquiror for this combination and that our experienced management team is best positioned to execute the integration of our companies and achieve the synergies that would result. We are ready to engage with the Jos. A. Bank's Board immediately," Sechrest added.

BofA Merrill Lynch and J.P. Morgan Securities LLC are serving as financial advisers to Men's Wearhouse, and Willkie Farr & Gallagher LLP is serving as legal adviser.

In Tuesday's regular trading session, MW is currently trading at $49.720, up $2.65 or 5.63% on a volume of 2.20 million shares, and JOSB is trading at $56.42, up $5.82 or 11.50% on a volume of 1.97 million shares.